Don't Blame Craigslist for the Decline of Newspapers

The journalistic world’s sniping at Craig Newmark, founder of Craigslist, recommenced yesterday after he announced on Twitter his $1 million donation to a Poynter Institute fund for ethics in journalism. Although the response to Newmark’s tweet was overwhelmingly positive, some chastised him by reprising the notion that journalism is in trouble precisely because Newmark’s Craigslist had pirated away its classified business and gutted its business model. “That’s nice but how about investing in the news organizations craigslist has undercut so devastatingly?” tweeted Philadelphia Inquirer writer Amy S. Rosenberg.

Rosenberg’s sentiment has had distinguished company over the years. “Craig Newmark…has probably done more than anything to destroy newspapers’ income,” the Economist wrote in 2006. In 2013, Alec MacGillis ridiculed Newmark’s philanthropic investment in newspaper ethics while simultaneously usurping their classified revenues. “How Craigslist Killed the Newspapers’ Golden Goose,” is how the MinnPost put it in 2014.

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We all lament the passing of the newspaper era, but hanging the blame on Newmark remains unfair as well as ahistorical. Newspapers themselves deserve a share of it. Where they gained monopoly power, which was most U.S. cities, daily newspapers gouged their classified customers pitilessly; they lobbied Congress heavily to block the early migration of classifieds to electronic forms. And the big newspaper chains helped destroy their own business by investing in national online classified advertising verticals, which they ultimately sold. Against this backdrop, Newmark was an inevitable force, but no villain.

The closure of the Washington Star provides the best illustration of how newspapers put the screws to their classified customers. Just before the Star folded in August 1981, the Washington Post was charging $2.85 per line in the daily newspaper for one time display. It didn’t take the Post long to raise the rate. By January 1982, the line cost $3.15. By January 1984, it was $3.65. In 1996, as the commercial Web began its ascendancy, a line cost $7.93, considerably outpacing inflation. Keep in mind that the Post and other newspapers weren’t raising prices because they were struggling. At that point, newspapers were a 30-percent-margin business, flush with so much cash that they were opening regional and international bureaus with abandon, buying up other newspapers, investing in television stations and other businesses. They raised prices because they could.

Newspaper executives did everything they could to protect this rent-collecting franchise. In 1980, when AT&T proposed the easing of regulations so it could create an “electronic yellow pages,” the newspaper publishers counterattacked. Katharine Graham of the Washington Post and other publishers met with senators about the proposal, and when one senator said what worried her is that an electronic yellow pages would erode her advertising base, she responded, “You’re damn right it is.”

Charging monopoly prices has a way of placing a target on your back. As the Web expanded, the newspaper giants didn’t sit on their hands as new competitors like eBay, Monster and RealEstate.com arrived. The newspaper companies partnered to create national advertising verticals in a variety of categories. Cars.com, which got started in 1998, was owned by Gannett, McClatchy, Knight Ridder, Tribune, Times Mirror, the Washington Post Co., Central Newspapers and A.H. Belo. The same outfit acquired apartments.com in 1998. In 1999, the Cox newspaper chain created Autotrader.com. Knight Ridder and Tribune bought CareerBuilder.com in 2000, and Gannet bought a one-third interest in 2002.

In other words, the newspaper giants did the same thing as Craigslist—they sought to exploit the Web. But newspapers didn’t do the Web quite as well as Craigslist, a stripped-down bulletin board, which didn’t break out of its San Francisco base until 2000. More important, the newspaper giants didn’t produce as good a product as Craigslist, as anyone who has used the service to buy or sell can attest. According to one study, Craigslist, where ads are mostly free, saved classified-ad customers $5 billion during 2000-2007. There’s another way of looking at that number, of course—that Craigslist “took” $5 billion in revenue from newspapers. But that analysis makes sense only if you think newspapers had some divine right to collect monopoly rents from their classified customers forever.

If you’re still sobbing for the newspaper companies, stop. The Cars.com and Apartments.com investors did nicely when they decided to cash out. Gannett bought out its four remaining Cars.com partners for $1.8 billion in 2014 and CoStar bought Apartments.com for $585 million the same year. It may be a small change compared with the profits conventional classifieds piled up in the old days, but it’s real money compared with today’s newspaper valuations. When the Graham family sold the Washington Post Co. to Jeff Bezos for $250 million, it retained its 16.5 percent share in Cars.com, for which it later collected $408.5 million. Graham Holdings got $95 million for its share of Apartments.com.

The decline of the newspaper is a multigenerational, multicausal phenomenon. Newspapers have been declining since the arrival of radio in the 1920s, with a steady attrition of total titles and per capita consumption over the years. The remaining newspapers were profitable only as long as they could demand monopoly advertising rates, and as long as the kinds of retailers that benefit most from newspaper ads—namely department stores—remained healthy. But as department stores have faded and the arrival of new editorial and entertainment competition on the internet, the newspaper has been unable to dominate as it once did. When the demise of the newspaper business is written, Craig Newmark won’t be the whole book. He’ll be just a short chapter.

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I tried to sell a Triumph Spitfire with a Washington Post advertisement a few years ago. Not even a nibble. A free ad on Craigslist attracted a dozen buyers and the car sold promptly. Tell me your Craigslist miracle via email to Shafer.Politico@gmail.com. My email alerts have saved readers billions, my Twitter feed is trying to sell an old CRT HDTV set, and RSS feed skims Craigslist for the entertainment value.